Chapter 3 Problems - Solutions(2)

# Chapter 3 Problems - Solutions(2) - Chapter 3 Problems Use...

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Chapter 3 Problems Use the following information for Boxware Corporation to answer the next four questions: Sales price per unit \$190 Variable cost per unit \$ 80 Average production 1,500 units per month Total fixed costs \$55,000 per month 1. What is Boxware's contribution margin per unit? Contribution Margin per unit = Sales price per unit – Variable cost per unit CM per unit = \$190 – 80 CM per unit = \$110 2. How many units per month must Boxware sell in order to break even? Break even = Fixed Costs / CM per unit BE = \$55,000 / \$110 BE = 500 units Sales – VC – FC = Profit \$190X - \$80X - \$55,000 = 0 \$110X = \$55,000 X = \$55,000 / \$110 X = 500 units 3. What amount of dollar sales must Boxware achieve each month in order to break even? Break even sales dollars = BE units * Sales price per unit BE dollars = 500 * \$190 BE dollars = \$95,000 CM Ratio Approach: CM Ratio = CM / Sales Ratio = \$110 / \$190 Ratio = 58% BE = FC / CM Ratio \$55,000 / 58% = \$95,000 4. How many units per month must Boxware sell in order to make a \$110,000 profit? Units = (Target Profit + Fixed Costs) / CM per unit

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Chapter 3 Problems - Solutions(2) - Chapter 3 Problems Use...

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